Auditing the Strategic Contribution of HR

This article first appeared in the HRWest Magazine, Spring 2008 edition. The magazine is published by the Northern California Human Resources Association.

There are a variety of approaches that can be taken when auditing human resource departments. However, the strategic audit of HR may offer the most insight into the fundamental question “How is the HR department performing?”

While there is clearly value in assessing the
forms, policies, procedures and HR activities to help ensure regulatory
compliance and use of “best practices” the standard checklist process
falls short of assessing the strategic contribution of HR.

The fundamental performance questions addressed in a strategic audit of human
resources are “Does the department align human resources and management
practices, policies and procedures with the organization’s strategic
objectives”? and “Is the HR department maximizing its strategic
contribution to the organization?” Most HR leaders readily answer
yes, pulling out their seven page list of “things I did this month”
or their audit check list as evidence of their department’s contribution.
However, if we conduct a strategic audit or ask operating officers
at those organizations the same question, the answer is often an
emphatic no.

“To have a plan you must know the objectives, know the current
performance, and use the tactics to improve performance toward
a specific goal.”

When I ask the COO what the strategic objectives are and eliminate the clutter
of platitudes and social editorial statements they invariably include;
increase revenue, decrease costs, improve the quality of service
and outputs, and improve productivity. It is difficult to imagine
any organization regardless of industry, not focusing largely on
these objectives. In the absence of definitive strategic objectives,
HR leaders would be well advised to use these objectives as the
default. If HR can substantively quantify how it supports and advances
these objectives, then there is strategic alignment.

Another factor that contributes to disparity between the perception of HR, the
COO and strategic audit results is in the operational definition
of strategic contribution. Having a “to do” list is not a strategic
plan. Just doing something does not make it strategic. Increase
productivity. “Yup. I did that”. Well, maybe. But it is not strategic
to attempt to increase productivity by hanging a picture of a flying
eagle with a quote from either Vince Lombardi or Abraham Lincoln
under the word “Persevere, or Teamwork or Achieve”.

It is not strategic to redo the employee handbook that ultimately reaches 84
pages and after the attorney got hold of it is so difficult to
wade through that no reader will ever make it past page 4.

It is not strategic to schedule “customer service” training that reviews techniques
your top people already use, your bottom performers will never
use and your middle group may or may not use.

These and other tactics/activities are only strategic if they are a part of a
plan to improve performance of a vital objective. To have a plan
you must know the objectives, know the current performance, and
use the tactics to improve performance toward a specific goal.

For example, if you know the average customer evaluation of your service department
is 3.6 out of 5, with 5 being outstanding and you may ask a vendor
to design and deliver a program to reduce the response time, or
other specific area in which your group’s performance was lowest.
It would be strategic to compare pre and post training service
scores to see if the training made any difference. Even if your
next service scores are lower, at least you know to discontinue
that program. Of course if service improves there has been a strategic
contribution. Just doing things, even a lot of things is simply
applying the laws of randomness and calling them strategic business
practices. They are not.